Economy as an essential part of the present-day politics of the Islamic Republic of Iran (November–December 2019)
Since the Revolution of 1979 the development of Iran has been greatly influenced by the anti-Iranian sanctions imposed on it by the United States. In May 2018, US President Donald Trump abandoned the long-awaited JCPOA agreement, under which Iran and the countries of the “six” (US, France, Britain, Germany, China and Russia) had reached an agreement on the nuclear issue in exchange for cancellation of the anti-Iranian sanctions. Trump administration reinstated sanctions against Iran and countries that trade with it. Long-term international sanctions worsened the economic situation in Iran and caused social instability inside the country.
Mid-November riots at the end of 2019 in Tehran over the hike in gasoline prices renewed the talks on probable overthrow of the Islamic regime in Iran due to its alleged inability to rule the national economy. This was just one episode, but most serious, in a series of the latest protests in Iran over the deteriorating economic situation in the country. Considering these factors, especially in the context of global interdependency of states, and economic transformations ongoing in the country, investigations on modern Iran demand examination of both – economic and political means, adopted by Tehran in response to the US sanctions.
The main thesis of the paper is that Iran is in active search of new, more efficient and fruitful approaches to solution of the national economy and foreign policy problems that in fact signal of its serious modernizing efforts and moves towards a moderate Muslim state status. The undertaken steps demonstrate strong flexibility and resistibility of the Islamic regime, its orientation at constructive and pragmatic inner economic and foreign political partnership. These trends in the Iranian thinking were examined with the latest data and concepts, covering 2018–2019 that enabled to reveal the changes ongoing in the Iranian comprehension of the role of religion in the ways national economy and politics function.
Consequently, the paper consists of an introduction and parts covering the theoretical–conceptual background, economic situation in Iran, its internal and foreign economic policy, and conclusion.
Theoretic and Conceptual Background
The main official document defining the role of Islam in the state policy and economy is the Constitution of the Islamic Republic of Iran. The document sets forth an aim of initiating “the process of intellectual and ideological evolution towards the final goal, i.e., movement towards Allah” and stresses that “it is the duty of the Islamic government to furnish all citizens with equal and appropriate opportunities, to provide them with work, and to satisfy their essential needs, so that the course of their progress may be assured” [Constitution, 1979].
The ideas of social justice not once were put forward by the humanity within various ideological frameworks. Iran, as elsewhere, is forced to think rationally on the reasons of deepening poverty, regional inequality, choice of foreign trading partners to get out of the long-standing crisis. Hence, a theological state needs scientific analysis of the reality, adoption of decisions compatible with Islam. This requirement gave birth to various theories reviewing and reconciling religious prescriptions with arising political and economic needs of a human being.
Modern Iranian scientists, for instance, investigate such issues as determinants of poverty. They came to conclusion that access to services and infrastructures had no significant impact on the likelihood of moving out of poverty; if the household head is older and selfemployed, the likelihood of being poor is gradually diminished; if the family members have some kind of social security or they own their house, household welfare would improve, etc.[Soltani et al., 2019].
The results of the study on reasons of inequality of the Iranian provinces revealed that increase of foreign direct investment and the ratio of industrial production, reduce the inequality of the provinces [Pourfaraj et al., 2019]. A group of other Iranian scientists [Azadi et al., 2019] examine a power of influence and political elite lobbying of each region in the decision-making and national budget allocations centers.
On his side, Ehsan Rasoulinezhad concentrates on issues of foreign trade preferences of Iran and Russia under sanctions. The imposition of various sanctions, he says, has pushed the foreign trade policy of these countries towards Asianization (Trade Convergence with Asia) and away from Europeanization (Trade Divergence from Europe). However, sanctions have stronger impacts on modifications of Iran’s foreign trade rather than Russian shift in trading partners. Iran’s trade divergences and distance from the West European region leads to the faster trade convergence of Iran to the Asia-Pacific region than Russia, he concludes [Rasoulinezhad, 2019].
In its turn, the authority of traditional interpretations of religion in Iran by Shiite Faqīhs is challenged now even by some of the senior contemporary Shiite Faqīhs, stress M.Goudarzi and A. Najafinejad [2019]. The clergymen want to reduce the conflict between Islamic religion and the standards of the developed world. It’s worth to mention here Ayatollah Saanei, a highly influential and famous figure among religious reformist clergymen. He was one of Ayatollah Khomeini’s closest associates and had been influenced by Khomeini’s urisprudential methodology in two aspects: 1) his struggle with religious formalism, as well as the struggle against the petrification and superstition in the seminary; 2) the importance of paying attention to the role of time and place in Ijtihad1. In Saanei’s view, the collective rationality or the custom (ʿUrf) of the people at any given time is the basic criteria for the definition of justice or injustice.
[1]Ijtihad can be defined as a "process of legal reasoning and hermeneutics through which the jurist-mujtahid derives or rationalizes law on the basis of the Qur'an and the Sunna"[Hallaq, 2005. P.208].
Seyed Kazem Sadr [2019] assures that there is a logical relationship and reciprocity between the two categories of knowledge, namely pure reason and practical reason. The ethical principles or norms are universal, he states, they are permanent and do not vary by time and place. This inspiration, however, does not deny that every individual possesses a different taste and preference that emanate from his physical needs at various times and environmental conditions.
Far from any reconciliation between religion and political-economic context, American scientists of Iranian origin, Abbas Milani and Roya Pakzad, see the roots of the present crisis faced by the Iranian regime in “corruption, mismanagement, harebrained economic ideas, and expensive foreign interventions” that are “augmented by the new sanctions imposed by the Trump administration” [Milani, Pakzad, 2019].
Specialists in Iran itself add [Monireh, Farahani, 2019] that external conflict, ethnic tensions, socioeconomic condition, investment profile, military, and religious tensions are the highly significant determinants of foreign investment inflows in Iran.
Theoretical review demonstrates that, despite all religious rhetoric, Iran is being forced to accept pragmatic approach by stimulating empiric studies and considering the political and economic interests of its citizens to improve religious teachings in accordance with the severe realities in and around the country. In response to the intensified US new sanction policy, accompanied by militarization of the Persian Gulf, Iran chose the “maximum resistance against sanctions” strategy, including a combination of political and economic instruments to keep the country stable, and the existing government strong enough to provide further progress of the country. To ensure this former President Hassan Rouhani’s administration was determined to tackle issues by both mobilizing domestic capacities and diplomacy with the world, and to stick to the principles of the Islamic Republic along the way. Thus, one of the main determinants of this progress that has been preserved up to date is progressively developing self-sufficient economy of the country and consolidation of regional partnership.
Economic Situation
Meanwhile Iranian analysts acknowledged the worsening situation in the national economy. The average goods and services Consumer Price Index in the 12-month period ending Nov. 21, 2019, increased by 41.1% compared with previous year’s corresponding period. The SCI had put the annual inflation rate for the preceding Iranian month, which ended on October 22, 2019, at 42% [Transportation Registers, 2019]. The average annual inflation gap measured by the same SCI, among income deciles stood at 2% in the eighth Iranian month (Oct. 23–Nov. 21), indicating a 0.2 percentage point decline compared with the previous month’s 2.2% [Iran's Rich-Poor, 2019]. At the same time 85% of Iran's tax revenues came from only 3% of taxpayers [Academic Expounds, 2019].
According to the World Bank, Iran’s economy was expected to contract further by 8.7 % in 2019/20 due to external shocks to oil and gas sector output [World Bank, 2019].
Based on the official sources, the western experts added [Fathollah-Nejad, 2019], that 12 million lived below the absolute poverty line and 25 to 30 million below the poverty line. One-third of Iranians, as well as 50 to 70% of workers, was in danger of falling into poverty. Approximately 10 to 13 million Iranians were “entirely excluded from health, work or unemployment insurance”. Officially, every eighth Iranian was unemployed, among the youth, one in four was unemployed (but some estimates go as high as 40%). These figures ranked Iran’s youth unemployment rate as among the highest worldwide.
On-site observations coincide with the sociological poll’s assessments that, in my view, fully reflect Iranian realities (Tabl.1,2), and logically proceed from the above-mentioned estimates of the Iranian specialists.
Table 1.
Iranian Public Opinion Under “Maximum Pressure”
Q1. In your opinion, how good or bad is our country's general economic situation? Is it:
| May 2015 | Jan. 2016 | Jun. 2016 | May 2017 | Jun. 2017 | Jan. 2018 | Apr. 2018 | Dec. 2018 | May 2019 | Aug. 2019 | Oct. 2019 | |
| Very good | 11.1 | 8.4 | 3.8 | 3.4 | 2.5 | 2.5 | 1.7 | 1.9 | 2.0 | 2.7 | 2.8 |
| Some-what good | 43.2 | 40.9 | 35.7 | 29.8 | 33.1 | 27.6 | 22.3 | 26.8 | 23.7 | 26.0 | 28.2 |
| Some-what bad | 22.5 | 24.2 | 29.4 | 28.4 | 29.5 | 28.2 | 26.5 | 27.9 | 29.8 | 30.2 | 27.3 |
| Very bad | 21.2 | 24.4 | 29.2 | 36.6 | 33.9 | 40.7 | 45.2 | 42.9 | 43.4 | 40.0 | 40.3 |
| DK/NA | 2.0 | 2.1 | 2.0 | 1.9 | 1.1 | .9 | 4.3 | .4 | 1.2 | 1.1 | 1.4 |
Source: [Iranian Public Opinion under “Maximum Pressure”, 2019].
Table 2.
Iranian Public Opinion Under “Maximum Pressure”
Q2. Right now, do you think economic conditions in Iran, as a whole, are getting better or getting worse?
| May 2015 | Jan. 2016 | Jun.2016 | May 2017 | Jun. 2017 | Jan. 2018 | Apr. 2018 | Dec. 2018 | May 2019 | Aug. 2019 | Oct. 2019 | |
| Getting better | 49.3 | 47.4 | 42.2 | 40.2 | 39.1 | 31.3 | 27 | 33.2 | 26.6 | 28.7 | 30.5 |
| Getting worse | 37.1 | 41.0 | 43.4 | 52.4 | 50.2 | 58.4 | 64 | 59.5 | 56.9 | 55.0 | 53.6 |
| Staying the same [vol.] | 9.7 | 6.1 | 9.2 | 4.1 | 7.7 | 6.2 | 5 | 4.1 | 8.7 | 8.0 | 9.7 |
| DK/NA [vol.] | 4.0 | 5.4 | 5.2 | 3.3 | 3.0 | 4.1 | 4 | 3.2 | 7.9 | 8.2 | 6.3 |
Source: [Iranian Public Opinion under “Maximum Pressure”, 2019].
Internal Economic Policy
Much attention therein was attached to the most important spheres of economy, which supposedly could curb the existing crisis. These were transport, banking and budget allocation, financial assistance, divestiture of state-owned companies, energy and water supply.
Transport – The government decided to export surplus gasoline to the neighboring countries. The decision to increase fuel prices referred only to domestic sale. Official estimates on the value of trade covering the beginning of the fiscal year (March 21 till Oct. 14), indicated that trading in different energy carriers generated $519 million for the treasury [Gasoline Offer, 2019]. It was supposed that generating revenue from gasoline export could help fix the ballooning budget deficit emanating from steep decline in oil exports (plunging from 2.5 million barrels per day to less than 500,000 bpd) due to the new US sanctions. The government said it would use the new earnings exclusively for public welfare [26,000 Tons, 2019]. The public, however, was predominantly skeptical about this measure.
Following a 200% hike in gasoline prices in Iran, demand for CNG hybrids skyrocketed. Over 5 million Iranians had hybrid CNG engines. The government therefore strongly prohibited domestic car manufacturers from increasing car retail prices, much-needed parts and equipment to convert cars to CNG hybrids were indigenized and centers were planned to work all over the country to meet rising demand. There were close to 250 active conversion centers in the country that could rise to 380. Depending on the type of car and size of the CNG tank, owners would be charged between $300–400 [Gasoline Price, 2019]. To further strengthen localization of the car industry a major local carmaker Iran Khodro was strengthening ties with Defense Ministry-affiliated firms by planning 23 auto parts production projects. The agreements with local part makers were expected to curb the capital flight of €127 million per year [Iran Defence Ministry, 2019]. But localization of auto parts, as Uzbekistani past experience showed, could not cover all demands of the car owners and the demand for foreign products naturally persisted.
With the aim of reducing road traffic and battling air pollution Iran’s Sixth Five-Year Development Plan (2017–22) tasked the government with increasing the share of rail in cargo and passenger transportation from the 12% and 8% to a minimum of 30% and 20% respectively by the end of the plan. To arrive at this goal, investments worth $28 billion were needed [Iran: Need, 2019]. The task was obviously difficult to realize in the international tension around Iran.
Banking and other financial issues – The CBI, as part of a plan called "Productive Working Capital" assigned a number of banks to lend 1,000 trillion rials ($8.3 billion) to productive, efficient businesses [Banks will Lend, 2019]. Besides, the CBI developed a new platform, Diba, to supervise open banking operations. Diba was also to be used for processing transactions of the planned regulated forex market. However, the long-awaited forex market was not opened, apparently due to failures to meet CBI obligations and preconditions set for its commencement [New CBI Platform, 2019].
Meanwhile, the government announced plans to issue Islamic financial securities worth 380 trillion rials ($3.3 billion) to partly plug the budget deficit. The “general revenues” in the budget were forecasted at 4,480 trillion rials ($39 billion), which was 5% higher compared to the previous year’s budget. Despite that, specialists predicted a worsening recession; they admitted that the fragile currency market would be more vulnerable to political tensions [Economic, Political Climate, 2019]. The government also approved a plan dubbed as the ‘productive credit certificate’ better known by its Persian acronym Gam. The main purpose behind the scheme was to avoid inflation emanating from new liquidity. Accordingly, banks and credit institutions lent 3, 382 trillion rials ($27 billion) during the first six months of the fiscal year (March 20–Sept. 22), out of which 2,111.7 trillion rials ($17 billion) was given to help recapitalize manufactures [Productive Credit, 2019].
At the same time, underprivileged provinces were planned to receive bigger shares from the government’s fresh cash subsidy, known as the Livelihood Assistance Program. The government discontinued previous monthly payments of cash subsidies to 400,000 individuals who were found to be economically advantaged [Underprivileged Provinces, 2019]. As a result, about 17.7 million households, including 60 million people, received cash support worth 24,200 billion rials ($184.73 million) [Rouhani Submits, 2019].
In general, the government came up with three main sources of funding for the next year's budget: the first being hefty subsidies – hidden and apparent (cash, non-cash) – the government payed every year. The value of these subsidies was put at 13,000 trillion rials ($103.17 billion). Taxation was to be the second source of funding the budget next year. The government didn’t intend to increase taxes – the tax bases of manufacturing enterprises were planned to be reduced next year. Besides, it was introducing new forms of tax including green tax. The third source was the sale of some government assets, whose total value was put at 70,000 trillion rials ($555 billion) [Iran's Next Budget Bill, 2019].
Iranian government also considered a budget of 12.8 trillion rials ($93.77 million) for the Ministry of Cultural Heritage, Handicrafts and Tourism in the fiscal year starting March 20, 2020. However, national economists were pessimistic about it since the budget was not sufficient regarding the over 40% inflation in Iran [Cultural Heritage, 2019].
Divestiture of state-owned companies – There was a governmental plan also for the divestiture of state-owned companies in the stock market. This would supposedly let people with small savings to buy shares, open opportunities to private firms, promote downsizing and curbs the bloated bureaucracy.
Energy and water supply – Concurrently, the government announced that it would purchase the excess electricity output of authorized miners who built their own renewable energy farms. Prospective miners were given another option regarding electricity use: having their own mini-grids or using renewable energy. There were more than 115 large solar farms in Iran, and around 3,500 smaller installations in cities and villages. By next year, it was planned to set up over 2,500 rooftop photovoltaic power units mainly in deprived rural areas [Gov’t Proposes, 2019] and to complete water supply facilities for 1,950 villages [Provision of Clean Water, 2019].
Employment – At the same time, Alocal startup ejob planned to assist the economically constrained by putting employers in touch with workers with an innovative twist. Scheduled for launch in December 2019, the startup, supposedly, could help find a flexible part-time or one-off job to those who were struggling to make ends meet and need some extra cash.
Thus, to survive under sanctions and perform the tasks of its “resistance economy” Iran was forced to adopt some neoliberal measures, new technologies and achievements of economic science, increase the share of its social-economic assistance to vulnerable layers of the population.
Some outcomes – It was quite clear that in the context of the US sanctions and military-political pressure, these governmental measures could not solve all social-economic problems. A modernizing Muslim country still in transition, with a new, specific development agenda, naturally came across numerous shortcomings that stimulated criticism even in the ranks of the governmental institutions that itself was an indicator of democratic transformations in Iran.
Thus, according to the Majlis Research Center think tank, the government enforced only a fraction of the proposed measures to curb inflation and control liquidity, it resorted largely to temporary and micro measures, but in doing so failed to address macro variables and was engaged in a “market regulatory approach”. [Criticizes Piecemeal Measures, 2019].
President of Tehran Chamber of Commerce, Industries, Mines and Agriculture Masoud Khansari blamed the growth of corruption on government intervention into the economy. Large number of conflicting directives disrupted the economic system of the country; people inferred different meanings from these directives [Tehran Congress Spotlights, 2019]. According to officials, the condition of car companies deteriorated and the main carmakers Iran Khodro and SAIPA incurred losses to the tune of 50 trillion rials ($416.6 million) each. The government was blamed for the inherent mismanagement, nepotism and chronic corruption for the decline in the once lucrative industry [Local Carmakers, 2019].
On the other hand, officials stressed progress in the previous Iranian year of the Iranian producers of ICT items, who earned $24 billion by exporting to over 15 regional countries. But Iranian specialists suggested raising import tariffs to at least 30%, highlighting low import tariffs in the ICT sphere as one of the major factors killing the motivation of companies to use local products, [Iran Marching, 2019].
Foreign Economic Policy
At the external level, despite official slogan “Neither East, nor West”, the Iranian government in fact adopted the course towards “Both East and West”. This was certainly stipulated by necessity in deeper integration of the national economy into the world economy to solve inner problems and attract foreign investments, to get access to international trade markets and curb the inflation and unemployment. To achieve these goals various measures were taken to facilitate the customs process both for exports and imports of the commodities to reduce the effect of sanctions. Measures were taken also to provide necessary foreign currency through Iran’s Forex Management Integrated System, as well as providing new facilities for importers of basic goods.
Still, the economic relations with foreign partners were not even mainly because of the sanctions, not excluding also some minor bilateral discrepancies. The choice of Iranian partners was apparently determined by their geographic, historical and cultural closeness, a stand towards the US and particular significance in cooperating within a future single energy and transit transportation system. To overcome present difficulties Iran preferred concentrating more on Asian direction, including primarily cooperation with China, Iraq and Turkey, UAE, Russia and India, as well as Afghanistan. Correspondingly, Tehran activated its economic activity first in Asia-Pacific, South Asia, Middle East and the Gulf, secondly, within the CIS and SCO frameworks. Simultaneously it strove to preserve economic relations with the EU, at least at the minimum level.
The following trends in relations with the main partners demonstrated Iran’s foreign political preferences and economic activity.
China – China, as a political and economic counterweight to the US, had been Iran's biggest trading partner, both on the import and export fronts, and preserved this stand during the first eight months of the previous Iranian year (March 21–Nov. 21). Exports to China stood at $6.8 billion, which accounted for 25.15% of total exports. China exported to Iran during that period $7.26 billion worth commodities and had a share of 25.59% of Iran’s total imports [Iran's Non-Oil Foreign Trade, 2019].
Turkey – Iran was Turkey’s 25th biggest export destination and 18th biggest exporter of goods to the country during the period. Their trade totaled $5.01 billion during the first 10 months of 2019 to register a decrease of 39.24% compared with the corresponding period of 2018 [Iran's Trade with Turkey, 2019].
India – India was the main sponsor of the vitally important for Iran Chabahar project. But its fluctuations based on the effect of the US sanctions negatively influenced the bilateral trade. Still, Delhi was one of the top exporters to Iran with $2.51 billion and a share of 8.85% during the first eight months of the Iranian year (March 21–Nov. 21) [Iran's Non-Oil Foreign Trade, 2019].
The Gulf – To normalize its relations first with its immediate neighborhood, President Hassan Rouhani put forward the Hormuz Peace Endeavor proposal at the UN General Assembly, September 2019. However, Fatemeh Sayyahi, a Middle Eastern expert, rightfully noticed it would be "unrealistic" to assume that the initiative could go forward while tensions run high between Iran and the kingdom [Iran-Saudi Dialogue, 2019]. This fact naturally restricted Iran’s relations with the Gulf, the main partners being only Iraq, UAE and Oman.
Iraq was Iran’s second biggest export destination after China in 2018. According to the Iran–Iraq Chamber of Commerce estimates, since the beginning of the fiscal year (March 21), the total volume of Iran's non-oil exports to Iraq stood at $5.71 billion, Iran held 25% of the Iraqi import market. Iran exported 19.76 million tons of goods worth $8.96 billion to Iraq, up by 49.15% and 36.71% in tonnage and value respectively year-on-year; and imported 73,563 tons of commodities worth $58.69 million from Iraq, down 43.14% [Iran's Exports to Iraq, 2019]. The reason for the trade decrease was obviously the inner instability in Iraq, aggravated by the US regional policy.
The UAE topped the list among neighboring countries, trading with Iran during the previous Iranian year (ended March 20, 2019). Exports to UAE amounted to 13.75 million tons worth $5.95 billion to register a 24.53% and 12.06% decline in tonnage and value respectively YOY. In return, the UAE exported 3.82 million tons of commodities worth $6.56 billion to Iran, down by 44.68% and 34.71% in tonnage and value respectively YOY [Iran Industries Ministry, 2019]. The relations were partially influenced by the Iranian tense relations with the US regional ally – Saudi Arabia.
The same can be said about Iran’s trade with Oman, which during the first half of the Iranian year (March 21–Sept. 22) stood at $220 million. Both sides agreed to increase their bilateral trade well beyond $1 billion per annum, considering the slowdown in the world economy. Notably, Iran’s exports to Oman rose from $146 million in March 2013–14 to $728 million in the previous year (March 2018–19), the same year Iran's imports from the sultanate stood at $433 million [Iran, Oman, 2019].
The state of Iranian trade with some CIS states, excluding Russia, during 5 last years can be seen from the following ADB data (Fig.1, 2).
The available data, based on the national statistics of the mentioned countries, revealed very low and uneven level of trade with Iran, with only some signs of the growing activity in relations with Armenia and Azerbaijan. The Iranian data from the Financial Tribune allowed us to see some progress in trade with Russia, Kazakhstan and Kyrgyzstan, as well as with Afghanistan during the previous Iranian year.
EEU – Main prospective vector for mutually beneficial relations was the EEU. Iran and EEU signed a three-year provisional agreement in Astana, Kazakhstan, on May 17, 2018, for the bloc to welcome Iran into EEU. A Preferential Trade Agreement between Iran and EEU came into effect on Oct. 27. 2019. Meantime, mutual trade was limited due to the same sanctions, shortage of comfortable modern routes, logistics and infrastructure, as well as institutional and economic weakness of the involved states. Yet, Iranian influential experts state said that the country exported $28.2 million worth of products to Eurasian markets since Oct. 21 to Nov. 22 in 2019. They put the products imported from Eurasia into Iran in the same period at $166 million” [Iran Exports, 2019].
Russia – During the previous Iranian year (ended March 20, 2019) Russia was the third major exporter of goods to Iran among neighbors, after the UAE and Turkey, as Iran had imported 2.17 million tons of commodities worth $1.34 billion from Russia, indicating a 59.39% and 84.52% hike in tonnage and value respectively YOY. Russia was the eighth exporter of goods to Iran in the world [Iran Industries Ministry, 2019]. However, it was clear that the Western sanction strategy restricted Russian possibilities to invest much into Iran.
Kazakhstan was in 2019 Iran’s third major trading partner among the EEU states from March 21 to Aug. 22. By December, mutual trade between Iran and Kazakhstan amounted to $83.6 million. Iran–Kyrgyzstan non-oil trade totaled $25.8 million during the five months to Aug. 22. Iran’s exports accounted for $20.2 million while the country’s imports from Kyrgyzstan reached $5.6 million [Iran's Non-Oil Trade with EEU, 2019].
Uzbekistan, Tajikistan, Turkmenistan and Afghanistan experienced the same challenges in economic relations with Iran as the EEU states.
Afghanistan was Iran’s third biggest export destination, after Iraq and the UAE, among neighbors and fourth in the world, as Iran had exported 5.67 million tons worth $2.92 billion to Afghanistan during the 12-month period, down by 4.18% in tonnage and up by 5.11% in value YOY [Iran Industries Ministry, 2019].
In the Iranian view, Uzbekistan always remained in the ambit of Iran's international relations and a potential target market. But despite some mutual governmental efforts to activate bilateral trade, it was low due to the reasons typical for the EEU countries and specific transitional difficulties. Iran’s exports to Uzbekistan stood at 92,381 tons worth $11.39 million to register a 1,480% and 165.25% growth in tonnage and value respectively year-on-year. Uzbekistan was Iran’s 17th export destination in the world and the 21st exporter of goods to Iran during the period under review [Iran's Non-Oil Trade with Uzbekistan, 2019].
In addition, Iranian–Turkmen relations remained tense due to the unresolved problem, concerning gas issue. However, the two sides were exploring ways to expand cooperation. With this aim on October 1–2 the 15th Iran–Turkmenistan Commission of Economic Cooperation convened in Ashgabat, Turkmenistan to discuss a wide range of issues related to transportation, telecommunications, economy and trade, fuel and energy, industries and mines, etc.
The same tendency was observed in relations with Tajikistan. The Fifth Exclusive Exhibition of Iran in Tajikistan took place in Dushanbe, on Dec. 21–24, 2019. The sides discussed issues of boosting bilateral economic cooperation.
EU – In relations with Europe Tehran was in constant search for the appropriate ways of extending trade bypassing the US sanctions but the efforts were ineffective. INSTEX was not operational due to complex technical issues and European fear of being targeted by US sanctions. Trade between Iran and EU member states during January–September 2019 stood at €3.86 billion to register a 74.92% plunge compared with the previous year’s corresponding period (Fig. 3). Iran exported €513.62 million worth of commodities to the EU during the nine-month period, indicating a 94% fall compared with the similar period of previous year.
In addition to the mentioned partners, Iran signed a Memorandum of understanding with South Korea’s Deputy Minister of small and medium-sized enterprises and Startups Choi Su-gyu on August 31, 2019, to boost cooperation between SMEs in the two countries. Besides, Iran revived the Iran–South Africa Commerce Committee to activate trade in Africa.
Conclusion
Thus, Iran was experiencing some signs of encouraging transformations towards more moderate type of Moslem country that became irreversible by the end of 2019. In this sense the US sanctions only activated the modernizing trends in the Iranian economic and political life.
These spirits were inspired by the ideas of social equality and justice stipulated by religion. The Constitution of Iran and new theological concepts just formulate them in modern, more distinct terms and allow to improve the economic legislation and governmental decision-making process, adjusting them to new economic and political environment.
Despite persistent economic problems, Tehran’s policy of maximum resistance against the sanctions achieved some positive shifts in the national economy even though after Trump’s administration the sanctions were not officially lifted. This is mostly certified by proved capabilities of Iran to develop its own nuclear program that allows it to withstand now the Western anti-Iranian strategies.
In foreign economic relations Iran in fact adopted the course towards “Both East and West”. This means cooperation with priority Asian partners: first in Asia-Pacific, South Asia, Middle East and the Gulf, secondly, within the CIS and SCO frameworks. Simultaneously it didn’t stop efforts to normalize economic relations with the European Union.
Correspondingly, Tehran was practicing some neoliberal ideas in its policy: certain democratization of social life; efforts to build a capable collective economic security system, combination of mutually beneficial bilateral and multilateral cooperation in the region.
It was natural, however, that a developing country under sanctions was struggling with numerous shortcomings and barriers: absence of clear-cut and distinct strategy; some inconsistency of the undertaken measures; corruption; distrust to the government and banking system; absence in some cases of necessary skills and competence; a certain extent of mismanagement; regional economic inequality; insufficiency of the financial assistance to the vulnerable layers of the population; etc.
However, the governmental policy of the examined period demonstrated strong flexibility and resistibility of the Islamic regime, its orientation at constructive and pragmatic economic relations both within and outside the country. It was clear that a theological state had sufficient resources and capabilities to control the economic situation and not allow its slipping down to the worst scenarios.
ABBREVIATIONS/СОКРАЩЕНИЯ
ADB – Asian Development Bank
CBI – Central Bank of Iran
CIS – Commonwealth of Independent States
CNG – compressed natural gas
EEU – Eurasian Economic Union
EU – European Union
ICT – Information and Communication Technology
INSTEX – Instrument in Support of Trade Exchanges
JCPOA – Joint Comprehensive Plan of Actions
SCI – Statistical Centre of Iran
SCO – Shanghai Cooperation Organization
SMEs – Medium-sized enterprises